Wohlfarth v. Chamberlain — 6 N.Y. St. Rep. 207

Majority

p. 207

Justin Wohlfarth, Resp’t, v. Ward B. Chamberlain, App’lt.

(New York Common Pleas, General Term,

Filed February 7, 1887.)

Headnote

Contract—To sell real estate—Defective title—When purchaser, NOT BOUND TO TAKE DEED —WHAT DAMAGES RECOVERABLE BY VENDEE.

In an action brought by a vendee to recover damages for a breach of a contract to sell real estate, it appeared that previous to the date of the contract the vendor, as trustee, lmd sold the premises in question at public auction, and had i directly himself become the purchaser, and had procured the title to be: alien in the name cf bis w fe; and then individually contracted, as owner and in his own name, with plaintiff to sell the same premises at an increased price; and that on the day appoi ted for closing of the purchase, the defendant tendered a deed executed by his wife, as grantor, he joining therein as her husband. This the plaintiff declined to accept, <on the ground that the defendant had violated h.s trust in dealing with flics trust estate for his own benefit, and that the wife’s tide so obtained was voidable at the instance of any creditor of the trust estate, and that the title was, therefore, not a marketable one; of all which dealing by the trustee the purchaser had notice at the time the wife’s deed was tendered to him. Held, that the purchaser was justified in refusing to accept the. title, and that the damages recovered on the trial, including loss of bargain, were justified, in view of the fact that defendant knew of the defects In. his own title at the time he contracted to convey, and could have remedied them, hut refused.

Appeal from judgment in favor of plaintiff for $1,500 damages, besides costs, entered on verdict of jury, in an action to recover damage;, for breach of a contract for the

p. 208

sale of real estate, brought by the vendee against the vendor.

Peter Condon, for resp’t; C. A. Seixas and Oratz Nathan, of counsel; Whaley <$$ Caldwell, for app’lt; Cephas Brainard, of counsel.

The defendant, by agreement under seal dated December 18, 1884, contracted to sell to plaintiff, for $10,075, the house and lot 207 East 109th street, the consideration to be paid by the plaintiff’s assuming a mortgage of $4,500 then on the premises, and paying $500 cash on the execution of the contract and $4,575 on the delivery of the deed. The deed tendered to the plaintiff was executed by the defendant’s wife, Elizabeth F. Chamberlain, as grantor, defendant joining therein as her husband. Mrs. Chamberlain held the title at that time, and at the time the contract of sale was executed. The history of her title (of which the plaintiff had full notice whén the deed was tendered to and refused by him) was as follows: “In April, 1884, the premises were owned by one John H. Deane, thé partner of defendant. They were then subject to mortgages for $8,000 and $1,000 respectively, the latter held by defendant, who, on April 19, 1884, assigned it to one Baumgarten, a clerk in his office, who, on the same day, assigned it to defendant’s wife. Both assignments were recorded on April 22d. The next day, April 23, 1884, Deane made to defendant a general assignment of all his property for the benefit of his creditors. On July 16, 1884, the premises in question, with a large amount of real estate belonging to the assigned estate, was sold at public auction by defendant as assignee of Deane. The parcel in question was knocked down to George F. Chamberlain, a nephew of defendant, who thereupon, at defendant’s request, assigned his bid without consideration, to one Henry F. Anderson, and defendant, as Deane’s assignee, executed his deed to Anderson, dated August 4, 1884, recorded September 5, 1884, consideration, $9,200. Anderson immediately conveyed the premises to defendant’s wife by deed, dated August 5, 1884. All this was done by direction of defendant, who was agent therein for his wife. Anderson took the nominal title from defendant, as assignee of Deane, for the sole purpose of conveying the property to defendant’s wife. The defendant, in December following, made the contract with plaintiff to sell him the premises for $10,075.

The defendant claims that the conveyances were bona fide, the purchase at the auction sale being made on his wife’s behalf to protect her interests as holder of the $1,000 second mortgage. • It will be observed, however, that that mortgage was originally held by the defendant, and was

p. 209

transferred by him to his wife (through his clerk, Mr. Baumgarten,) the day before the assignment to him from his partner was executed, and that such transfer was evidently made in contemplation of the assignment.

The undisputed facts of the case cast suspicion upon the title of Mrs. Chamberlain, and show that there is ground for the apprehension that its validity may be questioned or attacked by the creditors of Deane, the assignor. Upon the face of the transactions by the assignee Chamberlain, the defendant, it would seem that his wife is the mere nominal owner of the premises for his benefit and to enable him to deal with the trust property for his own profit. A prima facie case against the title is thus made out. The trustee after selling the property at public auction to a nominal bidder, procures the title to be transferred to his wife, and then makes a contract in his own name with a purchaser at private sale for an increased price. Of all this, and of facts not recited above, but tending to strengthen suspicion, the contracting purchaser has the fullest notice, and could only preserve his purchase, if attacked by the creditors, by showing the good faith of the trustee; an undertaking of some difficulty, I should think, and the issue of which is at least doubtful. Under these circumstances the purchaser is not bound to take the deed. People v. Open Board, etc., 92 N. Y., 98 ; Fulton v. Whitney, 66 id., 548; Schriver v. Schriver, 86 id., 575; Dodge v. Stevens, 94 id., 209.

The vendee in this case was entitled to recover as damages, for the failure of the vendor to give a good title, the loss of his bargain. The defendant knowingly contracted to convey property, the title to which was so doubtful, by reason of his own unauthorized dealings with the property as trustee, that no purchaser could be compelled to take it. When the facts were discovered, the vendee offered to take the property if the trustee would have it transferred again to himself and would then give his own deed as such trustee. ' This he refused to do, presumably because he did not wish the trust estate to benefit by the enhanced price at which he was selling it, but desired to retain that benefit for himself. This was clear evidence of bad faith, and of a refusal to give a good .title when it was in his power to do so, and entitles the vendee to such damages as he has sustained by such refusal. Pumpelly v. Phelps 40 N. Y., 59 ; Tinley v. Kinsey, 18 Hun, 255 ; Margraf v. Muir, 57 N. Y., 159 ; see Cockcoft v. N. Y. and H. R. R. R. Co., 69 id., 204 . The amount of the verdict cannot be questioned under these authorities.

Appellant claims the right to a new trial, on the ground

p. 210

that the court allowed evidence of his declarations, made after his" conveyance of the property, impeaching his wife’s title. Such declarations and the several acts of defendant which constituted notice to the plaintiff of the defects in. Mrs. Chamberlain’s title were admissible. They would be competent in a suit by a creditor of the assignor against the plaintiff, to show notice to him of the dealings of the trustee with the trust estate; and he is permitted in this action to show the same state of facts in order to prove that he could not defeat the creditor’s suit on the ground that he was a bona fide purchaser without notice. He was also entitled to show defendant’s own acts and statements to prove the bad faith of the latter in order t,o make out a proper case for full damages. This is an action for damages against the party making the admissions, and it is difficult to understand how his declarations and acts could be excluded.

There was no error in the other rulings on the trial. Proof was offered to show that the contract of sale, as originally prepared by defendant, contained a clause exempting him from liability from damages, incase of his inability to make a good title. This proof was offered as introductory to a conversation with defendant on the subject of the clause tending to show his probable knowledge at the time that his title might be questioned.

It was not error to exclude proof that in other contracts with other parties for other property, he protected himself by similar provisions. His declarations as to this property were alone material. There was no error in proving by a legal expert that certain recitals in the defendant’s deed to" Anderson showed that there was an unusual condition upon the sale of this property by defendant at public auction, viz., a sale, “subject to all encumbrances;” in order to argue therefrom that such a condition would be apt to deter bona fide bidders, and thus inferentially to question 'the bona fides of the purchaser, Mrs. Chamberlain; who took through the bid of George F. Chamberlain, assigned ; to Anderson, the two latter acting under her, or her husband’s instructions.

There 'was no error in the charge. The case was properly-tried at a trial term, being an action for damages.

The judgment should be affirmed, with costs.

Allen and Bookstaver, JJ., concur.